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Factoring Scenarios: How We Help Small Businesses

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There are many different types of businesses that Versant Funding's factoring facility can help. Several scenarios are outlined in the attached presentation.

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Factoring Scenarios: How We Help Small Businesses

  1. 1. Factoring: How we help small businesses get funded. By Dan Broadley 561.405.4101 dbroadley@versantfunding.com
  2. 2. Scenarios: Examples of Deals We Have Closed • Cash flow shortfalls / slow turning receivables • Company emerging from bankruptcy • Company whose lender is exiting the relationship • Start-ups: – With personal bankruptcy – With cash flow issues • Company with IRS liens and SBA loan encumbering all assets • Company with customer concentration
  3. 3. Cash Flow Shortfall Situation A cash-strapped domestic furniture manufacturer in the Midwest had worked hard to secure a $900,000 purchase order from a major department store. Success In just three days Versant was able to turn the company's accounts receivable into cash with an initial advance of $280,000, enabling it to pay critical suppliers. Through the use of the Versant factoring facility, the manufacturer was able to nearly double its monthly production and sales. Commissions paid: $42,256.90
  4. 4. Slow Turning Receivables Situation A corrugated box manufacturer was being strangled by its slow turning receivables. Their receivables were turning on an average of 60-70 days even though the terms were 30 days, which caused undue strain on their working capital and issues with suppliers. They were being forced to turn away larger jobs. Success Versant’s initial funding of $380K provided some breathing room and within 2 months Versant’s collection department reduced the client’s average pay days to 40. Commissions paid: $50,358.76
  5. 5. Coming Out of Bankruptcy Situation Following a Chapter 11 filing, a New Jersey manufacturer with $1.6 million of debt was in workout with a money center bank. The company was forced to turn down orders because it lacked the working capital to fulfill them. It had approximately $300,000 of receivables on its books, and $1.1 million in equipment. Success Versant negotiated a discounted payoff of $950,000 with the company's bank, saving our client $650,000. In addition, Versant was able to use an industry contact to finance the equipment to pay off the bank. Finally, by factoring the company's receivables Versant gave them the working capital needed to fill the orders they had previously turned down. Commissions paid: $65,588.75
  6. 6. IRS Lien and Bank Exit Situation A community bank was looking to exit its relationship which consisted of a line of credit and a term loan because of its borrower’s poor performance and IRS liens. Success Versant was able to negotiate a collateral sharing agreement whereby Versant paid off the LOC and paid down the term piece over time. In exchange, the bank subordinated its lien against the company’s accounts receivable. This deal provides an example of a “win-win” situation for all parties involved as the bank got out of a deal it no longer wanted and the company got a new source for its working capital. Commissions Paid: $108,700.21
  7. 7. Cash Flow Shortfall & Bank Exit Situation A metal fabricator encountered cash flow problems caused by large orders from several of its most important customers. In addition, the company had multiple liens on its assets. Success Versant provided a $3.5 million factoring facility that enabled the company to quickly fill its order backlog. Versant further arranged for another lender to be paid off. The new factoring facility gave the client the ability to meet larger orders from its most important customers, providing a solid foundation for future growth. Commissions paid: $47,691.04
  8. 8. Startup: Owner with Personal Bankruptcy Situation Electronics Manufacturer in the midst of a personal bankruptcy had $10MM in PO’s for the holiday season with HSN and QVC but did not have the capital to produce the goods. Success Versant was able to secure them PO financing through an industry contact and in conjunction with our factoring facility they were able to fill the PO without using any of their own capital. Commission Paid: $60,483.61
  9. 9. Start Up – Large PO & Negative Cash Flow Situation This public company, a recent start-up, had a purchase order for 40,000 units of a high-tech product from the largest U.S. home improvement chain. The company was operating with a negative cash flow, however, and did not have the capital to produce the units. Success Versant opened an irrevocable letter of credit to allow for the production of the units. The successful, on-time delivery of the 40,000 units provided all-important credibility to the company, which leveraged this success to secure additional orders for its technology product. Commissions paid: $84,451.50
  10. 10. IRS & State Tax Lien Issues Situation A leading over-the-counter pharmaceutical manufacturer had IRS and New Jersey state tax liens totaling almost $200,000. In addition, an SBA lender had a blanket lien on all company assets. On the positive side, the company had strong accounts receivable with leading retail pharmacy chains and a strong distributor. Success Versant provided funding that enabled the company to pay off its IRS and New Jersey obligations. Versant then negotiated a pay-down of $275,000 in exchange for the SBA lender's release of its lien on the company's accounts receivable. Commissions paid: $56,502.23
  11. 11. Single Debtor Concentration Situation A U.S. Subsidiary of a European corporation needed to finance it’s growth but did not have audited financials. In addition, 100% of it’s sales were to a single company with whom they did in excess of $60MM annually. Success Versant was able to get comfortable with the credit of their single account debtor and because Versant is not constrained by bank financing a single debtor concentration was not an issue. Commissions paid: $893,185.83
  12. 12. Commission Schedule Per Month Per Annum Sales $750,000 Invoices Closed $750,000 $9,000,000 Factoring Fees $37,500 $450,000 Commission Per Month Per Annum 10% $3,750 $45,000 Assuming we factor $750,000 worth of receivables in a month at a 5% rate (based on historical averages) Versant’s monthly fees would be $37,500 ($750,000*5.0%). This would result in a monthly commission of $3,750 for the life of the deal (typically 2 years) for a total commission of $90,000.
  13. 13. If you’re interested in getting more information about factoring or if you have a company that we can help please contact me: dbroadley@versantfunding.com 561.405.4101

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